Traders' Roundtable

Hi Frank,
Each major currency has its own Libor rate.

Frank,

Yes, that's the idea. Except that I would consider 1 month libor rates (in Bloomberg, us0001m index, bp0001m index....) and would test the system with a monthly rebalancing of the portfolio. I have my own backtester in Vba that works well for testing futures; but it gets more complicated ...

Forum Mgmnt,
Will veritrader 2.0 allow you to test the following system :

Consider a basket of, say, three currencies :
EUR, USD, JPY

Each month, go long the currency that has the highest interest rate and short the currency that has the lowest interest rate.

Thanks.

I retrieve the data directly in excel with the functions BLPH for historical and BLP for real time (Bloomberg calls these Worksheet Functions). I do my analysis in excel, so I don't have to export the data.

Hi weatherman, I use Bloomberg data, historical and real time.

an illustration : MXN in blue (without carry) VS MXN future (with carry) in red.

I use Bloomberg for EOD data. Bloomberg lets you chose between settlement price and laste trade. For example, on EURIBOR contracts, the settlement price is at 16:12 and the close at 18:00 (http://www.liffe.com/trade/hours.htm)

. I have tested a short term system on EURIBOR and have found a great ...

June 2 (Bloomberg) -- The hedge fund of Paul Tudor Jones,
which manages $8 billion of assets, views gold as effectively
another currency, following moves in foreign exchange markets
rather than supply and demand of bullion.
Gold can be understood best when compared with currencies
such as the euro ...

here we go :
http://www.amazon.com/exec/obidos/ASIN/ ... ingblox-20

Bollinger.

Suppose you want to buy a 5 year bond (dvo1=D5) versus a 10 year bond(dvo1=D10). The 2 most popular methods to structure the trade are the following :

- Dvo1 method : buy (1) 5year bond/ sell (D5/D10) 10 year bond. Roughly said, your PL will not move if each bond yield moves by the same ...

the best papers I've found come from the "gambling" literature. A pioneer in the field is Ed Thorp. Take a look at www.bjmath.com great site.

You are right about the definition of DV01. Suppose you want to put a "curve" trade where you buy a 5 year bond (with a dvo1 of 4.25) and sell a 10 year bond (with a dvo1 of 8.5), then you will have to buy twice as much of the 5 year bond than you will sell of the 10 year bond.

In real life ...

I have played around with the concept of Sharpe Ratio and posted this some time ago on another forum.

Suppose you have System1 with an annualized rate of return over riskless rate m1, and with an annualized standard deviation of s1. Then, your Sharpe Ratio is SR1 = m1/s1. Now, you also have ...

Relative Strength or Momentum as Portfolio Selection.

It is a market lore that you should buy "high relative strength" stocks (stocks that have performed best recently).
How has this strategy worked in practice? Take a look at :

http://www.fordinv.com/html/documents/SS0891.pdf

In this ...

I have done some stock research in the past but have never pulled the trigger. There is one website that has very interesting information on the subject.
http://www.fordinv.com/html/rs_specialStudies.htm
I suggest you read the studies, starting with the oldest one.


I have been doing some basic ...

Chuck

Interest rate curve spreads likely aren't mean reverting
I agree. That's why I was wondering if trend following systems worked on them. My testing has been mixed, so I was wondering if anyone had obtained clearer results.

On the other hand, 4 leg trades like
-Long EDM3
-Short EDM4
-Short ...

Chuck,
Do you apply a trend following system to Euribor spreads?
Do you exploit the mean reverting nature of spreads of spreads (for example, long ERM3, short ERM4, short ERZ3, long ERZ4)?
Thanks in advance.

Sounds a lot like what I was saying
So I misunderstood what you were saying.

Good luck with the easy money carry strategy.
Did I say it was an easy money strategy?

In the context of the above quote, what would you call it if you were very bearish USDJPY and sold rather than bought USDJPY?
I ...

This is not carry, this is standard FX trading.
Of course this is standard FX trading.
But looking at a basket of 10 currencies and buying the high yld one vs selling the low yld one is called a carry trade. I call it a carry trade, the Street calls it a carry trade. I suggest you type : "yen ...